A creditor may place a lien against your personal property, such as your house or car. The creditor files for a property lien in court, so the public record appears on your credit report. A public record like a lien has a negative effect on your credit score and may also affect whether or not a lender extends credit to you.
Lien Attachment
When a creditor files a lien against your property, the lien may be attached to a specific property, such as a house, or all of your real property. The lien stops you from selling the property without getting the lien removed through either a payment plan with the creditor, paying off the lien in full or filing for a lien release on the property. The person purchasing the property may also pay off the property lien.
Credit Effects
The exact number of points you lose from a lien posting on your credit report depends on the rest of your report. If you have many negative items on your credit report, the lien may not move your credit score down a great deal, since it is already reduced by other items on your report. If you have a clean credit report without any negative marks, your credit score takes a bigger hit from the sole negative account.
Future Loans
Even if your credit score is not greatly changed by the lien on your report, lenders may not issue credit to you due to the fact that you have a lien on your credit report. If you have an installment agreement with the creditor, such as in the case of a tax lien, the lender may change his mind as long as you are current on payments. You may also be disqualified for employment due to the bad credit score or the lien's presence on your credit report depending on the job you are applying for.
Removing
You may be able to negotiate with the creditor that added the lien to your property, especially if selling the property would enable you to pay off the lien or send the lien holder money toward what you owe. The creditor may also consider a payment plan in exchange for releasing the lien from your property. Otherwise, you'll need to pay the lien off in full before it is removed from your credit report.
